A full-scale war has been going on in Ukraine for more than a year and a half. At the same time, despite the devastating military actions, thanks to international support, hidden reserves, tax policy and stability of key industries, Ukraine, against all odds, managed to save the economy and ensure the functioning of the state.
One of the reasons that allowed the country to maintain a certain economic activity is its agriculture, which covers the basic needs of the national market, as well as ensures food security and the export of agricultural products, even despite the recent shutdown of the Black Sea Grain Corridor.
In addition, Ukraine managed to actively attract international support. Dozens of countries and organizations provide our country with financial, military, and technical assistance to keep the country's economy afloat - this includes loans from international financial institutions and countries, humanitarian aid, and targeted investments in key industries.
However, despite some positive aspects, uncertainty, lack of investment (no matter how many there are, in conditions of war, they are always not enough), destruction of infrastructure, trade links and logistics chains create serious limitations for economic growth.
A huge amount of money is currently circulating in the country, which, however paradoxically, flows from the State Budget as if from a cornucopia. Expenditure part of the State Budget in 2023 planned at the level of 2,6 trillion hryvnias - this is a huge amount, the largest during the entire period of independence. Where did the state get so much money? The fact is that only half of this amount is covered by domestic revenues from taxes and fees, while the other half is covered by financial assistance from international donors and creditors. And much more of such assistance is received than was laid down in the budget. For example, only in June of this year, according to the report of the Cabinet of Ministers, 133,7 billion hryvnias came to the general fund of the State Budget (of which 44,4 billion was international aid), while it was planned to receive only 84,1 billion. Remember this fact!
Money is literally falling from the sky, so Ukrainian officials are tempted to "master" it right here and now, without thinking about economic expediency.
According to information that periodically appears in open sources, the state budget is constantly being redone, transferring funds from one item of expenditure to another, as a result of which there is money in it for clearly optional expenses, such as the laying of cobblestones and the purchase of drums for bomb shelters.
This state of affairs did not escape the attention of the IMF — and in updated memorandum with the Fund Ukrainian authorities have undertaken to stop this practice and return to medium-term budget planning — only defense spending will be allowed to be revised. However, these innovations will enter into force only from January 1, 2024, and for now Ukraine lives in the former reality.
HOW PRIORITIES ARE SET
In order to understand the processes taking place in the country, it is necessary to know which main spheres of life the state spends its money on, both in peacetime and in wartime.
According to the Ministry of Finance, the largest part of public spending, until 2022, and a significant part now, goes to "social welfare". That is, for pension payments, for ensuring a minimum standard of living for the most vulnerable citizens, support for large families, disabled people, unemployment benefits, maternity and child benefits. In addition, there are expenses for the medical field, financing of schools, higher education institutions, etc.
At the same time, today's realities are such that defense spending is a priority for the state — a significant part of budget funds is directed to the support and modernization of the Armed Forces and support of national security.
If we speak more specifically, we are talking about a huge range of expenses — starting from the purchase of military uniforms, weapons, ammunition, equipment and salaries for servicemen and social payments to the families of the dead to some specific items of expenses such as conducting sabotage operations behind enemy lines or recruiting spies.
LACK OF CONTROL
From the outside, it seems that the state machine is moving in the right direction, as far as it is possible under the conditions of war, albeit slowly, albeit with a creak. All expenses and revenues are controlled (presumably by the Ministry of Finance), and the state has a clear plan of action.
At the same time, the complex military situation significantly affects the process of formation and management of the state budget of Ukraine - in the conditions of martial law, many expenditure and income figures become classified, which creates great difficulties in ensuring the transparency of the budget process.
For the same reasons, it is also impossible to understand who supervises which financial expenses and areas, just as it is impossible to establish the real need for financing one or another area - information is strictly dosed.
In general, the problem of non-transparency of the budget and state expenditures is systemic and caused by the hastily adopted State Budget last fall, when the country's future prospects were obscured by the fog of war.
Therefore, the State Budget-2023 specifies very few expenditure items, only general directions. Since they are listed in a general way, depending on the situation and the desire of one or another department, expenses can be easily changed, cut some, add others, freeze others. And if this issue is not controlled, the corruption component flourishes wildly.
Moreover, it turns out that there is no general supervisory body for these expenses in the state. Every ministry, every district administration. each village council boils in its own cauldron - and that is why the Ministry of Education spends hundreds of millions of hryvnias on museum repairs and shooting comedy TV series, the Ministry of Youth and Sports spends 300 million hryvnias for the construction of tennis courts, and the Dnipro District Administration of Kyiv buys trendy electric vegetable slicers 130 hryvnias each and an electric frying pan worth 720 hryvnias for... bomb shelters. If there is no control even at this level, what can be said about local councils far from the capital?
Besides, how notes economist Oleksiy Kush, half of the current state budget is financed by international partners. In fact, Ukraine currently has two budgets: the one based on domestic revenues from taxes and fees, and the one funded by international donors and creditors.
"The main budget was prepared based on the calculation of internal revenues from taxes and fees, and was planned mainly for financing the defense sector. Since there are many failures in the receipts of the budget from places, a situation is artificially created when the planned money for the expenditure part is not enough. It turns out that the two budgets, one of which is for the needs of the army, and the other for the welfare state and everything else, do not actually overlap. And if the first one doesn't have enough money, then the second one has a surplus. That is why it turns out that there are funds for museums and sidewalks, but there is no money for the salaries of the military." - says Oleksiy Kush.
According to the expert, not only the government, but also civil society should participate in the control over the effective management of the budget during the period of military conflict.
Voluntary and public organizations also play an important role in supporting the country, so it is simply necessary to ensure transparency and reporting in the use of funds received from volunteers and international partners.
THE PRESIDENT WAS NOT HEARD
And now we come to the unpleasant but objective truth - today in our country there is no single "party line" that pervades all spheres of life, such as "Everything for the front, everything for Victory", as it was during the Second World War. This trend is, of course, sometimes voiced by big and small officials, but it never came to its practical implementation. By and large the slogan "everything for the front" does not sound in public space, and no one at any level of power demands its implementation - that's why local councils do not work for comprehensive assistance to the defense sector, that is why tenders for the repair of benches or the planting of decorative bushes for tens of millions of hryvnias appear in the rear cities.
Volunteers who help the army rightly point out that every hryvnia that is currently spent on the senseless painting of facades could save a soldier's life, so it is completely incomprehensible why the Ukrainian authorities have not yet clearly articulated what money can be spent on and what not you can From this arises an unpleasant for society, but a true answer to the question of whether communities have the right to throw away money on clearly untimely purchases and repairs. They have, because there is no national course on the priority of frontline needs - the same for everyone, in the country!
Only one exception can be cited appeal Volodymyr Zelenskyi, who at the end of July called on local communities to consider it a priority and direct funding to the defense of Ukraine, and not to replacing cobblestones, because "we will not drive out the enemy with cobblestones." But for some reason, this call was heard only in the 17th month of the war, and, as can be ascertained, it remained just loud words. This is already evidenced absolutely wild August tenders and expenses from the local authorities, which seem not to have heard the words of the president.
WHAT CAN YOU SPEND ON?
Now let's move on to the question - what, besides defense, should a state that finds itself in its current position spend money on?
Based on the research of American economists, as well as the opinion of interviewed experts EliteExpert, in addition to supporting the Armed Forces, Ukraine, during a military conflict, is obliged to take into account and allocate funds for the following basic needs:
Medical Assistance. Military actions led to a multiple increase in the number of wounded and injured civilians. Therefore, financing medical institutions and providing them with modern equipment, medicines and personnel is the most important part of budget expenditures.
Humanitarian help. Russia's invasion has caused a humanitarian crisis, including forced displacement, civilian casualties, and the need for food, shelter, and other assistance. Budgetary funds should be directed to ensure the humanitarian needs of the victims, because according to the latest data, in Ukraine now there are almost 5 million internally displaced people, who fled the war — this is a huge number and huge costs.
Infrastructure and recovery. The hostilities caused enormous damage to the country's infrastructure, from damaged roads to completely destroyed towns and villages. Resources must be allocated for the restoration and repair of infrastructure to ensure the viability of cities and settlements, especially those affected by the war. For example, the restoration of the bridge destroyed during the war in Irpen, which interrupted the direct connection with Kyiv, is vital for hundreds of thousands of people. But painting another bridge somewhere in the Kirovohrad region in a patriotic yellow-blue color is clearly not vitally important.
Social support. During military conflict, many segments of the population have become particularly vulnerable, such as children, the elderly, the disabled, and refugees. Funding of social programs invested in ensuring the basic needs of this category of citizens is important.
Education. Education costs are a strategic priority for Ukraine. The development of the national education system contributes to the training of qualified specialists, the intellectual growth of society and competitiveness on the world stage. In addition, thousands of educational institutions were also damaged as a result of hostilities and need to be restored.
Economic development. Even in the conditions of war, this sphere is the most important for the state. Despite the limited resources, supporting certain sectors of the economy and stimulating entrepreneurship will have long-term positive effects and contribute to the faster recovery of the country after the end of hostilities.
As we see installation of a beautiful flagpole for 5 million hryvnias or daily cleaning of Boryspil Airport, which was closed a year and a half ago, for 51 million hryvnias, not in this list. At the same time, all the world's leading experts unanimously say that only optimal and completely transparent allocation of funds from the state budget will help keep the country afloat and ensure its development in the future. Ago allocation of money for the repair of theaters for young audiences — with all due respect to our little fellow citizens, this is the twenty-fifth task that the state needs to deal with at the moment.
In this regard, the International Expert Club and EliteExpert initiate constant public monitoring and a wide public discourse, dedicated to what areas receive funding from the state budget today, what the country's real needs are, and what the mechanism of control over Ukraine's expenditures during the war should be.
We believe that every citizen has the right to know how budget money is spent and who is responsible for monitoring this process.
We invite to the discussion government officials, leading economists, experts and public figures, whose publicly expressed position will help to form an open, accountable and transparent financial system in the state, which takes into account the real needs of Ukraine, and does not serve the interests of corrupt groups and individuals.
Olena Ovchinnikova, Oleksandr Shorokhov
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